Taxes Hefty tax on property sale!

[CalvinErs]

A non-resident friend of mine recently received the tax certificate from AFIP for selling his apartment. He was charged 14% of the sale price, which seems quite high. He's concerned as this hefty tax will essentially wipe out his profit, and when considering additional expenses like transfer fees for sending money abroad, as well as accountant and estate agent fees, he might end up with a loss. Should he appeal this tax rate, or is it standard for non-resident property sales?

 

[StiveCosae]

It would be beneficial to have more details regarding the taxation, such as whether AFIP imposed taxes on assumed rents. I concur with mariposa's suggestion that an appeal might not be in his best interest, potentially causing delays that could lead the buyer to sue for double the boleto amount if the sale cannot proceed as agreed (typically 30% of the real sales price).

My advice would be for him to pay the tax, take the money, and proceed with the sale. Knowing the duration of his ownership would also be insightful. If the 14% tax wipes out all his profit, one would hope he either saved significantly on living costs in the apartment or generated rental income that justified the investment. Additionally, it's crucial to ensure he can receive dollars for the sale and successfully transfer them out of Argentina.

 

[CharlieMicks]

There was no bienes personales to be paid, ndcj, because the apartment was below the threshold for this kind of tax. His ABL was up to date. He was not negligent in any way, it seems he is now being accused by some posters as if he was fined for trying to evade due payments!!
The accountant he spoke with about it said that it was a tax on the peso profit on the value of the apartment. If I find out more, I will update.

 

[LuciaMax]

The individual who initiated the thread may want to revisit this matter. According to my accountant, the exemption threshold does not extend to individuals without permanent residence, meaning temporary residents (including 'perma-tourists') are obligated to pay bienes personales tax on the entire value of their real estate, including personal homes. This could result in significant financial obligations, especially for properties owned over an extended period, catching owners off guard if they believed they were exempt from such payments. While the relevance to this specific case is unknown, it's valuable to consider this perspective.

 

[StiveCosae]

It's possible that there have been recent changes in the regulations, but as of 2007 and 2008, my accountant held a different perspective. During those years, when I held temporary residency and a DNI, I didn't pay any bienes personales tax on my apartment. In 2006, I paid because the threshold was lower than $305,000 pesos, and I paid the resident rate on the full value of my property as per the escritura.

There's another couple I know who are non-residents, and they claim to pay bienes personales based on the ABL figure, not the price stated on the escritura. This approach makes sense, considering that the ABL can be updated annually. However, the majority of people I'm acquainted with pay the tax based on the price in pesos as indicated on the escritura. It's worth noting that regulations may evolve, so it's crucial to stay informed about the latest updates.

 

[IgnacioGud]

Your accountant is right that all property owners, whether legal residents or not, must pay annual taxes on bienes personales. Residents pay 0.50 - 1.25% of the total value of holdings on 12/31 of each year. Non-residents (i.e. those without a DNI) pay a flat rate of 1.25% of the total value. but, of course, they're not required to pay taxes on property outside Argentina, which residents are required to declare.

Just to clarify, the exemption amount, currently $305.000, does not reduce the taxable base. For example, if you own personal property valued at $400.000, tax is due on $400.000, not on $95.000. On the other hand, if the total value of your personal property is $300.000, then NO taxes are due. (These values are all in pesos.)

The $305.000 exemption applies equally to residents and non-residents.

Fyi, here's the tax rate chart from AFIP's English-language pages at http://www.afip.gob.ar/english/about.asp.

. Amount . Tax rate
FROM $ 305.000 THROUGH $ 750.000 . 0.50%
FROM $ 750.001 THROUGH $ 2.000.000 . 0.75%
FROM $ 2.000.000 THROUGH $ 5.000.000 . 1.00%
FROM $ 5.000.000 ONWARDS . 1.25%

I have a call in to my accountant regarding CarverFan's original post. I will post more info when I hear from her.

 

[earlyretirement]

Your accountant is right that all property owners, whether legal residents or not, must pay annual taxes on bienes personales. Residents pay 0.50 - 1.25% of the total value of holdings on 12/31 of each year. Non-residents (i.e. those without a DNI) pay a flat rate of 1.25% of the total value. but, of course, they're not required to pay taxes on property outside Argentina, which residents are required to declare.

Just to clarify, the exemption amount, currently $305.000, does not reduce the taxable base. For example, if you own personal property valued at $400.000, tax is due on $400.000, not on $95.000. On the other hand, if the total value of your personal property is $300.000, then NO taxes are due. (These values are all in pesos.)

The $305.000 exemption applies equally to residents and non-residents.

Fyi, here's the tax rate chart from AFIP's English-language pages at http://www.afip.gob.ar/english/about.asp.

. Amount . Tax rate
FROM $ 305.000 THROUGH $ 750.000 . 0.50%
FROM $ 750.001 THROUGH $ 2.000.000 . 0.75%
FROM $ 2.000.000 THROUGH $ 5.000.000 . 1.00%
FROM $ 5.000.000 ONWARDS . 1.25%

I have a call in to my accountant regarding CarverFan's original post. I will post more info when I hear from her.

Ignacio, is exactly correct on this. Non-residents don't have the exemption. I believe they did in previous years but you have to remember that the laws are always changing at AFIP. I believe they changed the laws so that non-residents were exempted from the minimum limits in 2008. They kept changing the laws almost every year so whatever the law was back previous to that you have to remember it changes all the time.

There is NO special tax for non-residents if they are up to date on all their taxes including their annual asset tax, ABL, rental taxes (if they are renting out their unit).

There is a 1.5% transfer tax that all non-residents pay based on the value they are using on the title deed. There is also a stamp tax of 2.5% and the buyer and seller typically split this 1.25% each.

The problem for many expats or non-residents is that most of them don't understand the tax obligations and either aren't paying their annual asset tax or mistakenly assume there is some exemption for them. The laws are quite different for locals vs. non-residents.

Also, for non-residents, AFIP typically asks for every single page of your passport. If you have renewed passports, they even want to see copies of all the pages of your previous passport.

It's horrible but basically it's on you to prove that you weren't renting out your property and earning income from it. They will also ask for utility bills so they can see usage of electricity, gas, phone bills, water, etc. I've even seen situations where they went to go talk to doormen in the building.

The key is not to lie to them. I've seen a few non-residents that lied and said they were using it or their "novias" and AFIP went to the building and found out they were renting it.

They WILL assess a tax and basically are guessing on the amount based on what they think you might have rented it for. It's totally crazy but true.

If your friend was living in it all those years, no way he should have to pay some phantom tax.

I've found the vast majority of accountants in Buenos Aires have no clue what they are doing. Especially as it pertains to non-residents. Also most of the people at AFIP don't have any clue either. You can talk to 10 different AFIP offices and get 10 different answers.

Lots of red tape in Argentina but it pays to know the laws. And as others correctly mentioned, it's essential to pay ALL the appropriate taxes that you legally are liable for. Especially ABL and annual asset tax. AFIP has this CRAZY interest and penalties which can be up to 30% a YEAR. Totally crazy. And if you're renting out your property it's better to at least declare something each month of the lease. If AFIP sees regular rental income tax payments, they typically will leave you alone when you sell.

 

[CharlieMicks]

Well I'm happy to report that my friend's AFIP tax bill was reduced from nearly $34,000 to just $4,000. He has to pay the accountant for his work which was a substantial amount but obviously still works out at a big saving.
If I find out more details of what the precise errors were, will post.

 

[earlyretirement]

Yeah, this sounds better. I've found the vast majority of the people out there, especially foreigners that hear horror stories or "friend of friend" stories just don't understand the laws here or how they pertain to non-residents.

As long as you've been declaring your rental income, paying your ABL bills, paying your annual asset taxes each year, when you sell you will have 1.5% transfer tax, 1.25% stamp tax, seller portion legal fees and that's really it.

If you weren't declaring your rental taxes or not paying your taxes on time then all bets are off.

However, lately I am hearing from some foreigners where they were paying their taxes on time and also paying rental taxes and AFIP still tried hassling them over paying some extra. It wasn't too much more but they were VERY careful inspecting each utility bill and in months where there was usage, even if it wasn't rented, they assessed a tax on that month. My friend had that happen to him recently. Rather waste time appealing it, he paid the extra 2,500 pesos.

Your basically at the mercy of AFIP when applying for this non-resident permit to sell but it really helps if you understand the laws and taxes applicable to you.